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AEP Industries Inc. v. Thiele Technologies Inc.

United States District Court, E.D. Wisconsin

September 2, 2016

AEP INDUSTRIES INC., Plaintiff,
v.
THIELE TECHNOLOGIES INC., Defendant.

          DECISION AND ORDER

          WILLIAM C. GRIESBACH, Chief Judge.

         This case arises out of the purchase by Plaintiff AEP Industries, Inc., of industrial packaging machinery and equipment manufactured by Defendant Thiele Technologies, Inc. The case was first filed in the Middle District of Alabama but was transferred to this Court based on a forum selection clause contained in Thiele's proposal which that Court found to constitute the contract between the parties. Case No. 2:15-CV-315-WKW, Mem. Op. And Order, (M. D. Ala. March 29, 2016), ECF No. 36-1. Federal jurisdiction exists under 28 U.S.C. § 1332, and the case is before the Court on a motion to dismiss the complaint pursuant to Rule 12(b)(6). Fed.R.Civ.P. 12(b)(6). For the reasons that follow, Defendant's motion to dismiss will be granted in part and denied in part.

         FACTUAL ALLEGATIONS AND CONTRACT DOCUMENTS

         AEP owns an industrial facility located in Montgomery, Alabama (the Facility) where AEP manufacturers flexible plastic packaging products. In 2013 Thiele sent AEP a written proposal to manufacture and install industrial machinery and equipment (M&E) at the Facility for AEP's manufacturing activities. ECF No. 27-2. The total price was $2, 206, 195. Among other specifications, the M&E was to include two lines, each with a M1400-Split Side Weld Bag machine. Along with the proposal, Thiele made oral and written representations and warranties regarding the performance production capabilities of the M&E. Specifically, each M1400-Split Side Weld Bag machine was capable of processing 720 plastic bags and 60 cartons per minute. AEP relied on these representations in making its decision to purchase the M&E. ECF No. 27 at 2.

         In addition to the forum selection clause referenced above, Thiele's written proposal included other “Terms and Conditions of Sale.” ECF No. 27-2 at 28. The proposal expressly conditioned the sale on its Terms and Conditions:

1. Applicability: Sellers sale of products and services is expressly conditioned upon the terms and conditions contained herein. All quotations, offers to sell, proposals, acknowledgments and acceptances of orders by Seller are subject to these Terms and Conditions of Sale, and acceptance by Purchaser is expressly limited to them. Any conflicting terms and conditions set forth in any purchase order or similar communication submitted to Seller by Purchaser are objected to, and are deemed proposals for addition to the contract of sale, and do not become part of the contract of sale between Seller and Purchaser unless expressly and separately agreed to in writing by Seller. Authorization by Purchaser, whether written or oral, for Seller to supply the products and services will constitute acceptance of these Terms and Conditions of Sale.

Id.

         Among the Terms and Conditions of Thiele's proposal was the following warranty: “Seller warrants that the products sold are free from defects in materials and workmanship when used in the manner and for the purpose for which designed, and in accordance with all instructions and directions for installation, operation and maintenance furnished by Seller for a period of one year from receipt at Purchases designated delivery point, or 2500 hours of operation, whichever occurs earlier . . . .” Id. Thiele's liability for breach of the warranty was “expressly limited to the repair and replacement, at Seller's sole discretion, of any Product that is determined by Seller to be defective under the terms of this warranty.” Id. Lastly, the provision noted “The Warranties set forth herein are in lieu of all other warranties, whether expressed, implied or statutory, including but not limited to implied warranties of merchantability and fitness for a particular purpose.” Id.

         On or around December 3, 2013, AEP issued Thiele a purchase order for the M&E. AEP's Purchase Order states in capital letters that it is “SUBJECT TO THE FOLLOWING TERMS.” ECF No. 27-2 at 35. Under the heading “Miscellaneous, AEP's Purchase Order states:

This purchase order, as the same may be amended or modified in writing, supersedes all prior understandings, transactions and communications, or writings with respect to the matters referred to herein. When Seller has not expressly accepted this order, Seller, by commencing work hereunder, shall be deemed to have agreed to all provisions hereof.

ECF No. 27-1 at 4. One of the terms of AEP's Purchase Order was an express warranty of fitness, which reads: “Seller warrants the Material to be free from defects in workmanship and/or Material and to meet all of Buyer's specifications and performance requirements.” Id.

         On or around July 17, 2014, the parties agreed to modify one of the M&E's lines so AEP could manufacture quart sized plastic bags. The total price of the modification was $337, 500. In August 2014, Thiele delivered the first M1400-Split Side Weld Bag machine (the First Line) along with accompanying machinery and equipment to the Facility for installation and testing. The First Line did not include the modification for quart sized plastic bags. ECF No. 27 at 2-3.

         Following delivery the parties became aware that the First Line was unable to perform as represented by Thiele. Consequently, Thiele brought teams of engineers, installers, and repairmen to the Facility in an attempt to modify and repair the First Line so that it would function as promised. These modifications and repairs took place over approximately a six month period, with teams sometimes being brought in on a weekly basis. Despite these efforts, Thiele was unable to get the First Line to function up to the specifications. The First Line does not and can not meet the production requirements promised by Thiele. Specifically, the First line is unable to process 720 bags and 60 cartons per minute. AEP also experienced other failures with the First Line. Thiele has not delivered or installed the second M1400-Split Side Weld Bag machine (the Second Line) and AEP is unaware of the status of that line. ECF No. 27 at 3.

         AEP has paid Thiele $1, 835, 375.10 in connection with the purchase order. Additionally, AEP alleges that it has suffered consequential damages, incidental damages, and lost business profits as a result of the defective M&E. AEP has repeatedly demanded that Thiele remove the First Line from ...


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